Playing With Fire: Amazon Launches $200 Tablet, Slashes Kindle Prices

One year ago, almost to the day, Jeff Bezos gave me the reason why people should carry around a Kindle in the age of the iPad. No Angry Birds.

“The number one app for the iPad when I checked a couple of days ago was called Angry Birds — a game where you throw birds at pigs and they blow up,” Bezos told me in September 2010. “The number one thing on the Kindle is Stieg Larsson. It’s a different audience. We’re designing for people who want to read.”

Today at a New York City press event Amazon is releasing a $199 color 7-inch tablet device called Fire. It plays Angry Birds.

“Nobody is expecting that we’re coming out with a $79 Kindle!” –Jeff Bezos

No, Amazon is not giving up on people who mainly want to read. Bezos also unveiled a new e-book reader called the Kindle Touch. It uses the same high-density “pearl” e-ink as the previous Kindle, but you can swipe your finger on the page to turn the screen, type on an on-screen keyboard that otherwise slumbers while you snuggle in with Jennifer Egan or Neal Stephenson. It costs $149 with Amazon Whispernet mobile connectivity and only $99 for the Wi-Fi version. They ship on Nov. 21.

There’s also a new Kindle where you turn pages with the traditional side buttons. It’s slimmer and lighter — under six ounces — because there’s no physical keyboard. It costs only $79, and is available now. Bezos can’t contain his excitement at this. “At $79, it’s really going to blow people away,” Bezos told me in Seattle last week when he shared a glimpse of his new line of devices. “Nobody is expecting that we’re coming out with a $79 Kindle!”

All the new e-ink Kindles have an innovative feature called X-Ray. When you download a book on an e-ink Kindle you automatically receive a second file with information about the characters and settings of the book. The sources include Wikipedia and an Amazon-owned company book-related social service called Shelfari. It’s a welcome means to quickly figure out whether an unfamiliar character had appeared a few chapters earlier.

But Fire is the hottest of the bunch, because it marks Amazon’s media assault on the sizzling category of tablet computing. Ever since Steve Jobs introduced the iPad, a slew of competitors ranging from HP to Samsung have tried to come up with their own tablets. It’s been like the Charge of the Light Brigade as one after another get sent out to the slaughter. None of them are as good as the iPad and they generally cost as much or more.

With a groundbreakingly cheap, small, even simpler tablet — and a powerful inventory of books, movies, television shows and digital tunes to fire up — Amazon is a more formidable foe. Its goal is not selling hardware, but selling the media that runs on the device. Amazon, he says, now has a $15 billion media business — most recently it inked a deal with Fox for movies and television shows. “It’s not just books,” he says. “It’s music, games, software, it’s a bunch of different things.” Now it has a platform to play those songs, games, and apps.

Bezos sees the Fire as a machine that could make Amazon’s media services — some of which have lagged behind those of Apple, Netflix and others — as powerful as the Kindle has made it in books. The elements of Fire, he says, involve many services that Amazon has built in its 15-year history. Besides media, Fire involves its popular $79-a-year Amazon Prime service that allows customers free shipping, and the company’s quietly powerful Amazon Web Services infrastructure, which does computing for a huge number of internet companies, including even its competitor Netflix.

As with the Kindle, the Fire is not a shiny trigger for technolust. And it lacks some of the features of the iPad and other tablets. No camera. No GPS. Not even 3G. And only 8 gigabytes of storage.

But it is designed to do its job very well. Bezos insists that people not see Fire as a standalone device, but part of an integrated media service. “That’s why the Kindle has been successful,” he says. Like the original Kindle, the Fire arrives knowing who you are by your Amazon account — you’re ready to buy stuff. Weighing 14.6 ounces, it’s the size of a DVD case, and its seven-inch LCD screen shows movies sharply. It’s powered by a dual-core TI OMAP 4 chip. If you are one of millions who belong to Amazon Prime, you can stream from the reasonable if not totally satisfying (11,000 videos) collection of movies and TV shows for free. (Fire purchasers who are not Prime members get a one-month free tryout.) New software organizes music, which you can buy or upload to Amazon via its cloud music service.

Bezos takes special pride in the Fire’s speedy web browser, dubbed “Silk” because that substance is almost invisible yet really strong. The Fire uses a home-grown technology called “split browsing.” Because of Amazon’s advanced data centers, the company can handle some of the heavy digital lifting on time-consuming processes like loading web pages — before it sends the data off to the device itself. It gets a further boost because many popular sites use Amazon’s cloud services, allowing for greater efficiency. This enables Silk to run much faster than other tablet browsers.

Oh, and it also runs Flash. Take that, iPad.
Of course, because Fire runs on a modified version of the Android mobile operating system, Amazon has access to thousands of apps. Even though Amazon has made Fire simpler to use, it has taken care to make sure that you’ll have your Angry Birds.

“You can think of Android in two pieces,” says Bezos, citing what the user sees and what the developer has to deal with. “Android is simpler and easier to use in terms of user interface,” he says. “But our goal is to keep Android easy for developers — if they write an app, we’re going to work hard to make sure it’ll run on this device, but we’re going to — on the consumer-facing piece, you know — we’re starting with Android and making it simpler.”

Clearly Amazon is betting that there’s a big market for people who want tablets mostly for media and browsing — and don’t want to pay $500. But even if the Fire doesn’t give iPad a hotfoot, it will probably have a big impact on Amazon’s other competitors. Barnes and Noble, which had been feeling good about how recent versions of the Nook were arguably slicker than the now-outdated Kindles, is now outflanked by a more versatile color device and a very affordable e-reader.

Possibly the biggest loser today is not Apple, but Netflix. Just as its customers are outraged at higher pricing of Netflix streaming (and furious that the DVD business has been offloaded to a new subsidiary), here’s Amazon offering a nifty device with an even better price: $79 a year. And there are millions of people who pay for Amazon Prime who don’t even know they’re getting free video streaming. If Amazon builds up the inventory — and it certainly has the bucks and the clout to do this — it will be the logical place for disaffected Netflixsters to land after storming out of Reed Hastings’ house in a huff.

Still the introduction of Fire — which will ship November 15 — introduces a contradiction. For years, Bezos has been touting the virtues of e-ink for reading. Now he is introducing the first in what will probably be many back-lit, heavier Amazon devices. Which gadget will people choose?

Bezos has an answer. “They’re going to buy both,” he says.

But if that happens, who will stop playing Angry Birds long enough to read a book on the Kindle?